Lenovo poised to lead in China’s smartphone market by 2013

Lenovo, already China’s top PC seller, is expected to take the title for the country’s top smartphone vendor in 2013, Gartner said.

It made the prediction as Lenovo’s swift growth in China’s smartphone market has exceeded the research firm’s projections. Two years ago, Lenovo started selling smartphones in the country to take advantage of the booming mobile market. In last year’s third quarter, the company had a 1.7 percent share of the market, according to Gartner.

A year later, the company was ranked second in China’s smartphone market for the third quarter, with a 14.8 percent share. This put it right behind Samsung, which had a 16.7 percent share.

“We know that Lenovo is one of the strongest local companies in China,” said Gartner analyst Sandy Shen last week. “But we just didn’t expect the change to come so fast… We thought it would take them several years to grow their business in mobile devices.”

As a result of its strong PC business in China, Lenovo already benefits from a vast retail distribution network in the country, and a well recognised brand name, both of which have helped drive its smartphone sales, Shen said.

But Lenovo’s growth also comes as Chinese handset vendors are dominating sales of low-end handsets. These devices can be priced as a low as 400 yuan ($61) when bought without a contract, according to Shen. In contrast, Apple’s iPhone 4S starts at 4,488 yuan in China.

“(Lenovo) has a good product portfolio, from the low-end to the high-end, and their products are reasonably priced,” Shen said. “We think Lenovo will depend on the low-end market to sell handsets, so it will allow Lenovo to obtain a much larger share.”

Foreign vendors on other hand, such as Samsung and Apple, while popular, are selling devices at higher prices, which puts a limit on their smartphone shipments in the country, she added.

Despite the positive outlook for Lenovo’s smartphone business in China, Shen said it will be a challenge for the company to maintain its position in the market.

“They may be able to obtain the number one position, but the question is how long will they hold the position, or will they just be dethroned by another company,” she said.

“If you see the latest products from all these companies, they all look quite similar,” Shen said, pointing to the many smartphones now offering high-definition screens, with fast dual-core or quad-core processors. “I think the challenge is how Lenovo can have a good differentiator in its hardware brand.”